Saturday, October 20, 2018

Book Review: Corporations are People Too

By Eric Segall

I just finished reading a great new book by Professor Kent Greenfield of Boston College Law School called "Corporations are People Too (And They Should Act Like It)." For anyone interested in what constitutional rights corporations should possess, or in corporate rights and responsibilities generally, this book is a must read. Greenfield is one of the very few law professors in America with a serious background in both constitutional and corporate law, and his double expertise is reflected in almost every chapter of the book.

The essential thesis of the book is that the law does and should treat corporations as people, and the strong anti-Citizens United movement arguing that corporations are not people is deeply misguided. At the beginning of the book (pp. 2-3), Greenfield points out that, first, for a very long time corporations have been deemed people under a myriad of legal regimes because corporations can sue, be sued, and "own and sell stuff" all "in their own names and legal capacity." Second, he points out that, of course, corporations "are made up of people. Corporations are collective bodies in which humans come together ...to create goods and services to sell for a profit." Third, as an historical matter, corporations have been allowed by the courts to assert constitutional rights since the beginning of the 19th century.

After reading these opening pages, I was convinced that the twin ideas that corporations are not people, and/or that corporations shouldn't have constitutional rights, were absurd. As Greenfield points out, of course Exxon has a Fourth Amendment right to be secure in its property just as obviously as the New York Times has the first amendment right to publish any editorial it wants without government interference.

The rest of this fine book explores which constitutional rights corporations should be allowed to assert. Some issues are easy, such as the examples above. Others are much more difficult such as the issue at the core of Citizens United and its progeny: how much electoral interference or some might say participation by corporations can and should the government regulate. Those looking for pat answers and easy solutions need to look elsewhere. One of the great strengths of this book is its ability to distinguish easy and hard questions. Since the hard ones are, well hard, Greenfield discusses them with subtlety and gives the topics the deep attention they deserve.

What makes this book so significant and interesting is that the author presents the legal questions, such as how much forced disclosure can the government require of companies like cigarette manufacturers (152-52), or whether corporations like Hobby Lobby should be allowed to assert religious claims under state and federal RFRA's (95-100) against the backdrop of his corporate law expertise. For example, he believes the Court erred in Hobby Lobby for the following reasons:

[T]he fact that corporations are 'persons' should have led to the opposite conclusion [from the one the Court reached]. Corporations are separate from their shareholders. The central characteristic of the corporate form is a separateness from its investors and other stakeholders.... The personhood of the corporation meant that RFRA should not apply to a situation in which the corporation's claim is really a shareholder claim brought in the corporation's name. For Hobby Lobby to win, the Court had to assume both that the corporation was a 'person' under RFRA but was not a person -was not separate-under corporate law. Both cannot be true. (p.97).

Despite this argument, Greenfield points out that it is possible for corporations to have valid RFRA claims but only if such claims are brought on behalf of a company that can demonstrate in ways we would not require of humans that its religious character is "long-standing and consistent," and that this religious character limits the corporation's "activities in ways that imposed economic obligations or competitive disadvantages on it." (p.100). In other words, as a matter of corporate law, the religious claim must belong to the company, not the people who run or own the company. This conclusion seems counter-intuitive (how can a company exercise religion?), but Greenfield backs it up persuasively with his deep knowledge of corporate law.

The main chapters of the book address a variety of claims and rights asserted by corporations and provide interesting insight into how courts should review these claims and rights. This is one of those rare books that would help litigators and judges enormously because the constitutional and statutory analysis is always supported by corporate law realities that should, but usually don't, inform the analysis of such claims and rights.

The final two chapters contain an impassioned plea that the law change to allow corporate directors a much freer hand in taking into account diverse interests (such as employees and community-based concerns) than the current regime which requires a focus on shareholder value. I am no corporate law expert so all I can say about those chapters is they were were fascinating and seemed persuasive to me.

Greenfield's book repeatedly argues that both the law and our community should expect corporations to act more like people which would justify many of the rights he says they should be allowed to assert. For that to happen, corporate law and corporate culture need to change. To this constitutional law expert, and corporate law novice, that thesis seemed undoubtedly correct.

10 comments:

Eric: Thanks for this very thoughtful review. I haven't yet read Kent's book, but I did recently read (and will write a short piece for the BU Law Review online symposium on) Adam Winkler's We the Corporations. It appears there are many overlapping themes, although, as you and I discussed offline, Adam's treatment is more historical. That historical focus leads me to question one thing you say (and perhaps Kent says in the book): that giving Fourth Amendment rights to corporations is an easy yes. Adam explains how in the early 20th century and until quite recently, constitutional law distinguished between rights that were deemed "personal" and those that were economic. Under that regime, corporations lacked Fourth Amendment rights. This strikes me as a not-crazy position, so I would put the Fourth Amendment on the hard side of the hard/easy question divide.

One thought about corporate law: My late colleague Lynn Stout was a tireless champion of the view that corporate law does NOT require a relentless focus on shareholder value, although she acknowledged that many academics and judges think it does. I take it that Kent agrees with Lynn's normative perspective; she added the notion that there was already a strong basis in positive law for that position.

Thanks Mike, It feels like there has to be some way to stop the government from searching Exxon, the NY Times or Planned Parenthood (all corporations) without a warrant, and the 4th Amendment is the only way I think to get there.

Adam's book was great too and I recommend it as well to everyone interested in this topic.

Assuming that corporations are people, does that mean that a corporation is a "person" under various provisions of the Constitution, i.e., one person no matter how large the corporation? What about wholly owned or controlled subsidiary corporations of a corporation, are they similar to a family with children so that each is separate person? And what about hybrid entities, are they people too? Consider what has been reported about the make up of Trump Enterprises, consisting of perhaps 500 corporate/hybrid entities, is each a person? I haven't read Greenfield's book and don't plan to because of aging and eyesight issues. Based on Eric's review and Mike's comment, there may be many hard cases if a corporation is considered a "person" where designated in the Constitution.

Regarding Eric's reference to the final two chapters of Greenfield's book, a difficulty in making a corporation more responsible beyond primarily its stockholders is that each state makes its corporation laws, and historically in competitive ways to attract more incorporations in a state, e.g., Delaware. And Delaware has in turn caused other states competitively to broaden their corporation laws to better protect corporate officers and directors. Under federalism, can the states be expected to take " ... into account diverse interests (such as employees and community-based concerns) than the current regime [i.e., the states] which requires a focus on shareholder value"? May Congress step in?

I see Adam Winkler's book was referenced and the theme arose there too.

Sometimes, these things are spoken about in simplistic terms so that, e.g., the problem is that corporations have rights. But, as legal persons, that is a thing and was for quite some term. The issue is what rights. And, obligations.

Thus, e.g., you had experts on corporate law strongly upset at how Hobby Lobby or some such treated corporate law.

Some corporations with their actions injure and kill people of the human variety that if done by people of the human variety would be criminally punishable, including with imprisonment and even the death penalty. What happens to such a corporation? Is this equal protection?

There is no question that a corporation is a 'person' and has rights. But there are regular rights and Constitutional rights. Regular rights are those granted to a 'person' by government. Constitutional rights are those granted by the Constitution.

To ascribe a freedom of religion right to an inanimate person is something out of the Alice books. Really, if someone can tell me they actually saw a corporation sitting in a church, synagogue or mosque I will retract the first sentence. Cases like Hobby Lobby are simply a way that the religious conservatives use to impose their religion on those who do not practice it. Where in the Originalist thinking do Adams and Madison etc argue for corporations to have Constitutional rights?

And what about non-corporation entities. Does an LLC have Constitutional rights? Oh, maybe it does, maybe LLC's are mentioned in a Federalist Paper long lost. Yeah, that's probably it.

Does the NYT or NAACP as corporate institutes have constitutional rights?

Hobby Lobby is a for profit business corporation. I'm not sure about giving freedom of religion to that. OTOH, if the Catholic Church wants to promote its religion via an incorporated college, the college very well might have religious rights of some sort.

Based on SCOTUS' limited annual caseloads, how many decades may it take to work out the "hard" cases of rights of corporations as people? I'm trying to imagine Barbra Streisand singing "People, who need people, are the luckiest people in the world" with corporations in mind. Corporations may be more on SCOTUS' agenda than individuals' rights to vote.

Thank you Eric for your very thoughtful review, and thanks to everyone else for their comments.

Michael, you're correct to cite Adam Winkler and his new (and terrific) book about the history of corporate constitutional rights. Adam and I have done a few events together, and one could see our books as companions -- his is historical, and mine is normative. I think Eric basically has my view correctly summarized w/r/t the 4th Amendment. Without 4th Amendment protection, businesses would be subject to warrantless searches at the whim of any government official. That would undermine the ability of companies to satisfy their social and institutional role of conducting business in the marketplace and would allow government officials to act arbitrarily and maliciously.

And yes, Lynn Stout and I agree on much as a normative matter. We disagreed somewhat on matters of description of current law (I am skeptical of her claim that positive law protects stakeholders) but as a matter of prescription our work is largely aligned. (And I cite her several times in my book.) I will miss her voice greatly in the years ahead.

For the other commenters, a few words.

I understand that my book won't make anyone happy. I think the answer to the question of whether corporations are people is: they are *sometimes*. If you are in the "corporations are not people" crowd and believe that corporations should have no constitutional rights at all, then you will be dissatisfied by that. But as I explain in the book, the line that no corporation can ever claim constitutional rights is simply not sustainable. Nor is the line that corporations should receive all the rights of humans workable either. So one has to figure out when they can claim rights and when they can't. And the answers are not easy, and don't fit on bumper stickers. Even rights such as religion, which initially seem like easy "no" answers, are not so easy. As Winkler explains in his book, the Catholic Church was (is?) organized as a corporation. Certainly churches themselves can claim exercise rights, even if they are organized as a corporation. And certainly if a city or state required businesses to close on Sundays with the avowed purpose of encouraging church-going, then those businesses could bring an establishment claim. At the same time, corporations should not be assumed to have the same religious interests as their shareholders. Such claims -- like in Masterpiece Cakeshop and Hobby Lobby -- are based on a *rejection* of corporate separateness not its culmination.

If you are in the crowd that believes government should let businesses be, then you won't be happy with my book either. I am not a libertarian -- far from it. I argue that corporations ought to have public obligations, enforceable in law. That is a matter of corporate governance, not a matter of constitutional jurisprudence.

But to address the serious problem of corporate power and its misuse, we have to take a look from both the constitutional side as well as the corporate governance side.